FY 14 Q2 Earnings Presentation MATTHEW WALSH EVP & CFO

Transcription

1 FY 14 Q2 Earnings Presentation MATTHEW WALSH EVP & CFO

2 Disclaimer Statement Forward Looking Statements This presentation and release contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as believe, expect, anticipate, intend, estimate, plan, project, foresee, likely, may, will, would or other words or phrases with similar meanings. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Catalent Pharma Solutions expectations and projections. Some of the factors that could cause actual results to differ include, but are not limited to, the following: general industry conditions and competition; product or other liability risk inherent in the design, development, manufacture and marketing of our offerings; inability to enhance our existing or introduce new technology or services in a timely manner; economic conditions, such as interest rate and currency exchange rate fluctuations; technological advances and patents attained by competitors; and our substantial debt and debt service requirements that restrict our operating and financial flexibility and impose significant interest and financial costs. For a more detailed discussion of these and other factors, see the information under the caption Risk Factors in our most recent Annual Report on Form 10-K and our other reports filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the date of this release or as of the date they are made, and Catalent Pharma Solutions does not undertake to update any forward- looking statements as a result of new information or future events or developments unless required by law. Non-GAAP Financial Matters Management measures operating performance based on consolidated earnings from continuing operations before interest expense, expense/ (benefit) for income taxes and depreciation and amortization and is adjusted for the income or loss attributable to non-controlling interest ( EBITDA from continuing operations ). EBITDA from continuing operations is not defined under US U.S. GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. Management believes these non-gaap financial measures provide useful supplemental information for its investors evaluation of the Company s business performance and are useful for period-over-period comparisons of the performance of the Company s business. 1

3 Disclaimer Statement We believe that the presentation of EBITDA from continuing operations enhances an investor s understanding of our financial performance. We believe this measure is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and use this measure for business planning purposes. In addition, given the significant investments that we have made in the past in property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of our cost structure. We believe that EBITDA from continuing operations will provide investors with a useful tool for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates depreciation and amortization expense. We present EBITDA from continuing operations in order to provide supplemental information that we consider relevant for the readers of the financial statements, and such information is not meant to replace or supersede U.S. GAAP measures. Our definition of EBITDA from continuing operations may not be the same as similarly titled measures used by other companies. As exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of results on a constant currency basis in addition to reported results helps improve investors ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. In this release, we calculate constant currency by calculating current-year results using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign exchange translation. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP. In addition, the Company evaluates the performance of its segments based on segment earnings before minority interest, other (income) expense, impairments, restructuring costs, interest expense, income tax (benefit)/expense, and depreciation and amortization ( Segment EBITDA ). Under the indentures governing the notes, the Company s ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is tied to ratios based on Adjusted EBITDA (which is defined as EBITDA in the indentures). Adjusted EBITDA is based on the definitions in the Company s indentures, is not defined under U.S. GAAP, and is subject to important limitations. We have included the calculations of Adjusted EBITDA for the periods presented. Adjusted EBITDA is the covenant compliance measure used in certain covenants under the indentures governing the notes, particularly those governing debt incurrence and restricted payments. Because not all companies use identical calculations, the Company s presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. 2

4 Agenda FY 14 Second Quarter Highlights FY 14 Q2 Segment Financial Performance FY 14 Q2 YTD Segment Financial Performance Adjusted EBITDA Cash Flow 3

5 Second Quarter Highlights Revenue growth of 2% on a constant currency basis Unfavorable mix within Oral Technologies negatively impacts Q2 profitability, but not expected to impact subsequent quarters Q2 Adjusted EBITDA of $93M, $9M below PY; LTM $404M Solid improvement within Development and Clinical Services Integration efforts related to CSS site consolidations are nearly complete and new business wins are improving Clinical Supply facility in Shanghai, China officially open for business Announced our partnership with Pharmacylcics for commercial supply of recently approved oncology therapy, Ibrutinib Oral Technologies continues to be a platform for future growth Acquired Relthy Laboratórios, a Brazilian-based softgel producer Encouraged by the Modified Release recovery during the quarter; EBITDA growth within our Controlled Release and Zydis offerings 4

6 FY 14 Q2 by Segment ($ millions) Three Months Ended Three Months Ended Increase/(Decrease) Excluding FX Increase/(Decrease) Dec. 31, 2013 Dec. 31, 2012 $ % $ % Oral Technologies Net Revenue (4.3) -1% 0.1 0% Segment EBITDA (4.7) -6% (3.7) -5% Development & Clinical Services Net Revenue % 4.9 5% Segment EBITDA (0.2) -1% (0.3) -2% Medication Delivery Solutions Net Revenue % 1.7 3% Segment EBITDA % 0.1 1% Revenue Elimination (2.5) (2.9) 0.4 * 0.3 * Other EBITDA (16.6) (32.7) 16.1 * 15.6 * Combined Total Net Revenue % 7.0 2% EBITDA % % 5

7 FY 14 Q2 YTD by Segment ($ millions) Six Months Ended Six Months Ended Increase/(Decrease) Excluding FX Increase/(Decrease) Dec. 31, 2013 Dec. 31, 2012 $ % $ % Oral Technologies Net Revenue (5.2) -1% 2.6 0% Segment EBITDA (3.4) -2% (1.7) -1% Development & Clinical Services Net Revenue (2.0) -1% (3.0) -1% Segment EBITDA (5.4) -14% (5.5) -14% Medication Delivery Solutions Net Revenue % % Segment EBITDA % % Revenue Elimination (4.6) (4.2) (0.4) * (0.5) * Other EBITDA (28.2) (45.0) 16.8 * 16.1 * Combined Total Net Revenue % % EBITDA % % 6

8 Operating Earnings to EBITDA ($ Millions) Quarters Ended LTM Quarter Ended LTM Dec 31, Mar 31, Jun 30, Sep 30, Sep 30, Dec 31, Dec 31, Earnings/(loss) from continuing ops (27.6) (13.9) (26.7) (18.9) (18.0) Interest Expense, net Income tax expense / (benefit) 8.0 (0.1) 18.2 (6.6) Depreciation and Amortization Noncontrolling Interest EBITDA from continuing ops

9 LTM EBITDA Adjustments Quarters Ended LTM Quarter Ended LTM ($ millions) Dec 31, Mar 31, Jun 30, Sep 30, Sep 30, Dec 31, Dec 31, EBITDA Non-cash stock compensation expense Impairment charges and (gain)/loss on sale of assets Financing related expenses (0.1) 6.0 US GAAP Restructuring Acquisition, integration and other special items Foreign exchange (gain)/loss (4.8) (1.7) 3.8 (2.5) (1.9) Other (Sponsor's fee, severance) Subtotal Estimated cost savings - - Adjusted EBITDA

10 FY 14 Cash Flow (Six Months) ($ millions) Continuing Discontinued Total Net cash provided by/(used in) operations 41.5 (1.1) 40.4 Additions PP&E, net (39.0) 4.0 (35.0) Payment for acquisitions, net (51.0) - (51.0) Financing activities 0.7 FX on net cash 2.7 Increase/(Decrease) in cash (42.2) Cash at beginning of period Cash at end of period 64.2 Items of note: Net cash cycle working capital decrease/(increase) 1.3 Cash interest 77.7 Cash taxes 12.4 Cash used for Restructuring 6.2 Cash used for M&A/Integration/Special Items (est.) 4.7 Revolver at 12/31/13 ($200 million facility) 30.0 Net Debt at 12/31/13 2,

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